WRAPUP 2-Puerto Rico bonds cap turbulent week with mild price rise

WASHINGTON, July 11 (Reuters) - Prices on Puerto Rico debt
drifted higher on Friday and trading of the junk-rated bonds
slowed, calming some of the recent market turbulence inspired by
the island's troubled power authority.

Late on Thursday the cash-strapped utility, the Puerto Rico
Electric Power Authority (PREPA), disclosed it had used about
$41.6 million from its reserves to make a July 1 bond payment of
$471.56 million. The filing was a worrying indication of the
independent agency's financial deterioration to investors who
believe PREPA will soon default or restructure its debt.

But on Friday prices on PREPA revenue bonds maturing in 2040
reached 42.125 cents, the highest since 45.625 cents on July 1.
That was equal to a yield of 13.149 percent. By early afternoon
there were only three trades in the bonds, Municipal Securities
Rulemaking Board data shows. In comparison the bonds switched
hands 25 times on Thursday.

Meanwhile, the price on the commonwealth's general
obligation bonds sold in March with an 8 percent coupon reached
86.782 cents, equal to a 9.461 percent yield, on Friday. That
nearly erased the week's price drop on the bonds. The highest
price the debt fetched in secondary trading on Monday was 87
cents. It then dropped swiftly, with the highest price on
Tuesday only 85.6 cents, or a 9.608 percent yield.

Early on Friday the commonwealth reported that during fiscal
2014 it brought in $9.037 billion in revenue, a 5.5 percent
increase from the previous year.

Still, the recent price plummet has affected the $3.7
trillion municipal market, especially the mutual funds that hold
island debt. The rating agencies cut Puerto Rico bonds even
further into junk after the commonwealth passed a law on June 26
allowing its most troubled public agencies to restructure debts
in a process akin to bankruptcy.